The Economic Engine of Political Change

The concluding chapter of Democracy in Chains is titled “Get Ready”. Here MacLean gathers all of her implications together and portrays the arc of influence that I summarized in Part 1 of my responses. Readers absorb details of just what the cause is capable of doing. I won’t recount the chapter. Instead, I would like to focus on pages 225-228, where MacLean argues that constitutional checks and balances should be removed because they unjustly constrain the will of the majorities of people who have been marginalized. Note, throughout the book thus far, MacLean argues for a concentration of power in the federal government, and here she is next arguing that the powers of the federal government should be increased by way of relaxing constraints on democratic majorities.

It should be noted that some prominent scholars have taken the position that the U.S. Constitution is outdated. Terry M. Moe and William G. Howell, for instance, writing at the classical liberal Hoover Institution, pin organizational failure on the Congress, which rarely in history has crafted effective policy to respond to the nation’s problems. We should expect as much, they argue:

With Congress’s pathologies rooted in the Constitution, the ultimate problem is the Constitution itself. The founders crafted a government 225 years ago for a simple agrarian society of just four million people, some 700,000 of whom were slaves. Of the free population, 95 percent were farmers. Government was not expected to do much, and the founders—mainly concerned about avoiding “tyranny of the majority”—purposely designed a byzantine government that couldn’t do much, separating authority across the various branches of government and filling it with veto points that made coherent policy action exceedingly difficult.

Their proposed remedy is a constitutional amendment granting the president a universal form of “fast track” authority, whereby the executive branch crafts policy proposals and Congress holds a straight up or down vote, full stop. Congress can pass its own bills, but presidents would still have veto power.

MacLean similarly starts with the position that the U.S. Constitution is outdated, in particular for having been devised under the institution of chattel slavery. She aims first at the “grossly malapportioned Senate” under which “the vote of a Wyoming resident carries nearly seventy times more weight than the vote of a Californian in Senate elections and deliberations. How fair is that? It’s not.” Okay, bicameralism and balance of apportionment are legitimate topics that have been the topic of political thought for centuries. For MacLean’s part, she recognizes the advantages to stability that checks and balances impart, but says the downsides aren’t worth it.

It takes upheaval of truly historic proportions to achieve significant change in America, even when it is supported by the vast majority–as evidenced by the civil war required to end slavery, the tens of thousands of strikes and other struggles need to achieve reform during the Great Depression, and the mass disruption and political crisis that civil rights activists had to bring about in order to win for African Americans the same constitutional rights enjoyed by other citizens. The existing checks and balances, in short, create an all but insuperable barrier to those seeking to right even gross social injustice. The problem is systemic. Built into our Constitution, the change-blocking mechanisms prevent us as a polity from addressing our most profound challenges until there is supermajority support for doing so. [pp.225-6, endnotes in original not reproduced here].

MacLean then illustrates the point with reference to the recent rise of economic inequality, and concludes: “What makes the U.S. system ‘exceptional,’ sadly, is the number of built-in vetoes to constrain the majority.”

I have to admit, the emphasis on disruption and crisis early in the passage seems to contradict the emphasis on supermajority later, and this throws me off. It’s difficult for me to glean what MacLean sees as the conditions that are necessary for significant reform under the current U.S. constitutional arrangements. I’m not entirely convinced that I understand what she is saying. It’s also weird that she finds herself articulating a point of view that is widely shared among market liberals who want less government, a view that was articulated most famously by Milton Friedman, namely that only a crisis brings about real reform. And I find it a shame that MacLean is either entirely innocent of, or chooses to ignore, episodes of significant reform that happened through peaceful transitions of power and democratic deliberation, all under the very constitutional structure that she is attacking, and all for the benefit of protecting the rights of people in marginalized groups. Salient examples abound, but let me get to my main point.

If MacLean were to have her way, and if constitutional brakes on democratic majorities were to be removed, anyone who shares her normative stance will certainly come to regret the move, and indeed many of them will take to the streets and demand to have the provisions restored. How can I know? Because I’ve studied cases that fit this description exactly, and they have worked out badly for marginalized groups.

In 2005, the U.S. Supreme Court ruled in the famous Kelo v. City of New London case that governments can use eminent domain to seize private homes and business, and transfer them to other private parties (developers) for the public purpose of promoting economic development. (I have written extensively on this topic). It is important to recognize the the Court’s action in Kelo fits exactly what MacLean recommends for the Constitution: a relaxing of constraints on legislatures, which represent the will of democratic majorities, from infringing on the rights of people in democratic minorities. Unlike the government’s police power, the takings power is limited both by public use and by just compensation. The Kelo case upheld the expansion of the set of legislative actions that satisfy public use to include transfer for private development, and by doing so increased local governments’ discretionary powers in their exercise of eminent domain.

How did this turn out? Economics helps answer that question, both through efficiency analysis (how did the ruling affect the size of society’s pie?) and incidence analysis (how did the ruling affect the relative sizes of the pie slices?). In general, economics demonstrates how people absorb more of the incidence of any event — they bear more of its burden — the less flexible is their situation (i.e. in inverse proportion to their elasticity of actions). And we can use this piece of economics to study how relaxing the public use constraint has affected different groups in society, including those marginalized groups favored by MacLean.

[T]he targets of economic development takings are usually poor and politically weak. Since World War II, some 3 to 4 million Americans have been displaced by economic development and “urban renewal” takings, most of them poor and minorities (Somin 2007a, 269–270). In the 1960s, urban renewal takings were sometimes referred to as “negro removal,” because so many of them targeted poor African Americans (Pritchett 2003, 47). A 2007 survey suggests that most recent economic development takings also target the poor (Carpenter and Ross 2007). Targeting the poor makes it less likely that the victims of economic development takings will be able to effectively resist in the political process, even in cases where the taking in question causes more economic harm than it creates benefits. [Note and references from original not reproduced here.]

This is the opposite of what people with MacLeans’ normative views want. They want less hammering of blacks and the poor, not more*, and presumably it doesn’t matter whether the force wielding the hammer is “the market” or “the government”. The less of it the better, full stop. Which is why I would predict that people of her normative stance would quickly demand that the constitutional provisions be put back in.

By the way, this is exactly what happened in the wake of the Kelo case, as thousands of people protested across the country, demanding that their state legislatures enact tighter restrictions on discretionary power to use eminent domain, relative to the Kelo standard. At the end of the day, as my co-authored work has shown, about half the states ultimately revised their statutes to exclude private development from the definition of public use, thus re-introducing the constitutional constraints that the Kelo decision had removed. (For the full story, please see my 2009 Review of Law & Economics paper, “Pass a Law, Any Law, Fast! State Legislative Responses to the Kelo Backlash”).

In taking an extreme position advocating unhindered majoritarianism, MacLean has mopped herself into an analytical corner, and she does not have an adequate understanding of political economy to be aware of having done so, much less to know how to get out of her own trap.

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.189, ch.7)

The most successful entrepreneurs know what they do well, they know the market and the opportunities within it, and they choose those activities that create the most value. This is true in economic as well as political markets.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.178, ch.7)

[W]hen the right elements come together at the right time and place and overwhelm the status quo, it is because special people make it happen. We call them political entrepreneurs.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.176. ch.7)

While we started this book with Danny Biasone saving basketball, we end it with Norman Borlaug saving a billion lives. These stories are not that different. Both faced vested interests, which were reinforced by popular beliefs that things should be a certain way—that is, until a better idea came along.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.174, ch.6)

Because there was a general belief that homeownership was a good thing, politicians found the public with open arms.... Everybody was winning—except Alfred Marshall, whose supply and demand curves were difficult to see through the haze of excitement at the time, and except Friedrich Hayek, whose competition as a discovery procedure was befuddled... In short, once politicians started getting credit for homeownership rates, the housing market was doomed.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.166, ch.6)

Everyone responded rationally to the incentives before them. In short, the rules that guided homeownership changed over time, which in turn changed the incentives of these actors. And bad things happened.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.153, ch.6)

They understood the economics. The ideas had already won in ... the regulatory agency itself. All that remained to be overcome were some vested interests and a handful of madmen in authority.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.146, ch.6)

If the idea for auctions of spectrum use rights had been part of the public debate since at least 1959, why didn’t the relevant institutions change sooner? What interests stood in the way?

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.121, ch.5)

When an academic scribbler comes up with a new idea, it has to resonate well with widely shared beliefs, which in turn must overcome the vested interests at the table. Many forces come together to explain political change, even though it may seem like coincidence of time and place.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.120, ch.5)

It’s the rules of the political game that deserve our focus, not politicians’ personalities or party affiliations.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.119, ch.5)

In short, ideas are a type of higher-order capital in society. Like a society that is poor in capital and therefore produces little consumer value, a society that is poor in ideas and institutions will have bad incentives and therefore few of the desirable outcomes that people want.